World View & Market Commentary. Forest first; Trees second. Focused on Real & Knowable facts that filter through the "experts" fluff and media hyperbole. Where we've been, what the future may hold and developing a better way forward.

Saturday, April 30, 2011

Friday, April 29, 2011

Equities are climbing again this morning, the last trading day of the month. The dollar continues its slide into nothingness (even relative to other debt saturated currencies), bonds continue higher not in support of equities, oil is higher, gold is in new record territory, silver is still working on breaching the $50 mark despite another attempt to cut it down via margin increases, and food commodities are bouncing slightly after declining yesterday.

It’s typical that a bullish bias exists on the last and first trading days of the month. There was a small movement in the McClellan Oscillator yesterday, so expect a large price move today. Which direction? Well, let me consult my daily pump you up with fluff POMO schedule…

Yep, another $5 to $10 Billion today and every day. Is it ever going to end? I say that if it does we will see an instant return to another wave of deflation. And if they keep it going commodity prices will continue to the moon. Will they keep it going? They have to, the “Fed” doesn’t work for you, they work for the private central banks.

Personal Income and Outlays in March are showing the money printing in action and if this report is even close to accurate then we may be seeing the beginnings of inflation in incomes. If that continues, it will fuel a spiral in inflation expectations that will require more and more money pumping from the “Fed.” Again inflation is hot in this report and I’m certain that aspect of it is understated – here’s Econopray:

HighlightsThe consumer sector got some lift from income growth in March. Personal income in March grew 0.5 percent, following a 0.4 percent gain in February. The latest was a little higher than the median projection for 0.4 percent. Wages & salaries rose a moderate 0.3 percent, softening from 0.4 percent in February.

Consumer spending slowed somewhat in the latest month but was coming off a robust February. Personal consumption expenditures printed at a 0.6 percent rise in March after jumping 0.9 percent the prior month. Analysts had forecast a 0.5 percent gain. The slowing was largely due to a leveling off in durables after the large advance in this component in February. Durables were a little better than many expected as earlier released unit new motor vehicle sales dipped in March. Of course, higher gasoline prices helped boost the nondurables component. Nonetheless, real PCEs managed to gain 0.2 percent, following a 0.5 percent surge in February.

For PCEs in March, strength was led by nondurables (includes gasoline), up 0.9 percent, after a 1.7 percent surge in February. Durables eased to up 0.1 percent, following a 2.1 percent jump the prior month. Services spending advanced 0.5 percent after a 0.4 percent rise the month before.

On the inflation front, the PCE price index continued to be hot, jumping 0.4 percent and matching the February boost. However, the core rate decelerated a bit to a sluggish 0.1 percent rise in March, following a 0.2 percent gain in February. On a year-ago basis, headline PCE inflation worsened to 1.8 percent from 1.6 percent in February. Core PCE price inflation was steady at 0.9 percent on a year-ago basis. The latest core numbers will let the Fed keep arguing that underlying inflation is still soft.

Year on year, personal income growth for March came in 5.3 percent, compared to 5.2 percent in February. PCEs growth posted at a year-ago 4.6 percent, up from 4.5 percent the prior month.

The consumer sector is holding up a little better than expected despite high gasoline prices. The question is whether the price effects are "transitory" as hoped by the Fed. The income gains are at least helping to offset the impact of higher gasoline prices on consumers' budgets.

So then it must be okay to send oil prices to the moon? Heaven help you if you live on a fixed income.

Wait… are wages really increasing or aren’t they? In a separate report, the Employment Cost Index does not show the gains:

HighlightsA rise in benefit costs fed an above-trend rise in the employment cost index which however shows no acceleration in wages. The ECI rose a quarterly 0.6 percent in the first quarter vs a run of 0.4 percent gains in prior quarters. Year-on-year, the ECI is up 2.0 percent for no change vs the fourth quarter. Wages rose 0.4 percent, the same pace as the fourth quarter, and are up only 1.6 percent year on year. Benefits jumped 1.1 percent for a 3.0 percent year-on-year increase with health benefits for employers up 3.4 percent. For comparison, the year-on-year rate for the CPI was 2.7 percent in March.

I took the liberty of drawing a big fat trend arrow for your wages (err, I mean employment costs). CPI, of course, is trumped and reality is much higher than advertised. I’m giving this report on wages the benefit of a doubt, but who really knows as the data is so widely warped that trust in the money printing central’s data makes one look like an idiot.

Gee, could that be why confidence is being lost in the dollar? Or could that be why China and Russia are on a gold buying binge? Or why central bankers of the world are exchanging their debt backed money from nothing for gold?

April 29 (Bloomberg) -- Central banks that were net sellers of gold a decade ago are buying the precious metal to reduce their reliance on the dollar as a reserve currency, signaling demand that may extend a record rally in prices.

As developing countries accelerate purchases, gold may reach $2,000 an ounce this year, compared with a record of $1,538.80 yesterday in New York, said Robert McEwen, the chief executive officer of producer U.S. Gold Corp. Euro Pacific Capital’s Michael Pento, who correctly predicted gold’s highs for the past two years, forecast a 2011 high of $1,600.

Prices reached a record 14 times this month on demand from investors seeking an alternative to the dollar after the currency slumped to the lowest since 2009, U.S. debt widened, and the Federal Reserve signaled April 27 that borrowing costs will remain near zero percent for an extended period. The economy in China, the biggest foreign holder of U.S. Treasuries, grew 9.7 percent in the first quarter.

“China is out to have more gold than America, and Russia is aspiring to the same,” McEwen said yesterday in an interview in New York. “When you have debt, you don’t have a lot of flexibility. China wants to show its currency has more backing than the U.S.”

In 2010, central banks became net buyers for the first time in two decades, adding 87 metric tons in official-sector purchases by countries including Bolivia, Sri Lanka and Mauritius, according to World Gold Council data. China, with more than $3 trillion in foreign-currency reserves, plans to set up new funds to invest in precious metals, Century Weekly reported this week. Russia purchased 8 tons of gold in the first quarter.

China’s Gold ReservesChina, which has just 1.6 percent of its reserves in gold, may invest more than $1 trillion in bullion, Pento said. “China wants to be an international player, and they need to own more gold than they currently have.”

The U.S. Treasury Department projects the government could reach its debt ceiling of $14.3 trillion as soon as mid-May and run out of options for avoiding default by early July. The Fed has kept its benchmark rate between zero percent and 0.25 percent since December 2008 to help stimulate the economy, driving the dollar down 11 percent against a basket of six major currencies during the past year.

“Ultimately the best thing we can do to create strong fundamentals for the dollar in the medium term is first, keep inflation low, which maintains the buying power of the dollar, and second, create a stronger economy,” Fed Chairman Ben S. Bernanke said on April 27.

Uh, huh. The handwriting has been on the wall for quite some time. But remember, those who produce the money are the ones WHO are really in control. In this nation that would currently be the private banks. They know that the math of debt doesn’t work, and I still think that switching to a gold backed money works for them as long as they are still the ones who control and produce the money.

While the U.S. is supposedly the world’s largest holder of gold, that gold has not been truly assayed for decades, and in that time the central bankers have been acting as if they own it (you really own it). They have acted freely to swap it all over the globe and even though that gold truly belongs to the people, they won’t even allow an audit of their activities. So who knows how much gold there is in reality?

The lesson here is two-fold. First and foremost, what’s most important is WHO controls the production of money. Secondly never trust private individuals with your physical gold – always take and maintain delivery of the real thing – paper gold is an outright swindle.

The European Commission is investigating whether 16 bank dealers, including Citigroup Inc. and Deutsche Bank AG, colluded by giving market information to Markit, a financial information provider. Regulators will also examine whether nine of the firms struck unfair deals with ICE Clear Europe, a clearinghouse for derivatives, shutting out competitors.

“Lack of transparency in markets can lead to abusive behavior and facilitate violations of competition rules,” Joaquin Almunia, the EU’s competition commissioner, said in an e-mailed statement. “I hope our investigation will contribute to a better functioning of financial markets.”

Global regulators have sought to toughen regulation of credit-default swaps, saying the trades helped fuel the financial crisis. The EU’s probe into the CDS market adds to separate investigations in the U.K. and U.S into whether banks colluded to manipulate the London interbank offered rate.

The commission said this “may have the effect of foreclosing the access to the valuable raw data by other information service providers.” It said some of the clauses in Markit’s licence and distribution agreements “could be abusive and impede the development of competition in the market for the provision of CDS information.”

‘Behaved Badly’“What we are looking at is whether the main players in the market have behaved badly, have entered into anti-competitive agreements or abused a possible dominant position,” Amelia Torres, a commission spokeswoman, told reporters in Brussels today.

Oh yeah… Collusion, “Lack of Transparency,” Manipulation, Abusive, and most importantly “Behaved Badly.” Uh huh, and just look at the names associated.

Of course we’ve been preaching about this for years. But nothing will be done that has any meaning because they are the ones WHO have wrongly been allowed to control the production of money, and then they sent the bill to you and me. Ridiculous – these banks and their schemes need to be cut down, a truly healthy economy will prove to be elusive until that occurs.

The Chicago PMI was just released for April. It fell from 70.6 to 67.6 which is also below consensus. “Consumer” Sentiment was also just released for April, and came in very close to March’s level at a still depressed 69.8 on their Index.

'Fukushima - gross miscarriage of radiation science'

Someone's smokin' alright - But I think Bernanke plans to keep on tokin'...

Thursday, April 28, 2011

Ever notice that the word “CONfidence” begins with the root con? I’ll have more on that in a minute…

Meanwhile, stocks are down, the dollar is down and has been more or less crashing nonstop (but is now bouncing a little due to bad economic data), bonds are shooting higher on the bad data, oil set a new high and pulled back slightly, gold is at another new all-time high, silver is climbing again back to just under $50 an ounce despite margin intervention just the other day, and most food commodities are just slightly lower.

Weekly Jobless Claims shot up from 403,000 to 429,000. This is the third week in a row now back above 400k, and this rise was against expectations that it would fall to 390k. Here’s Econohope finding it hard to continue the improvement claim:

HighlightsInitial jobless claims are definitely on the rise and it may not be auto related. Initial claims jumped 25,000 in the April 23 week to 429,000 which is nearly 40,000 above expectations (prior week revised 1,000 higher to 404,000). The Labor Department said layoffs in the auto sector were isolated and not a major factor. The four-week average rose a steep 9,250 to 408,500 and is nearly 15,000 above the month-ago level. Initial claims were on a convincing downward trend, but no longer with this month's data pointing to trouble for the April employment report.

Any number above 350k represents job contraction, jobs have been contracting now for years, not just months.

GDP for the first quarter supposedly rose by an annualized rate of 1.8% against expectations of 2.0% or more. This is down sharply from Q4’s 3.1%. Here’s Econospin, then I’ll de-spin it for you:

HighlightsThe economy slowed during the first quarter of 2011. However, the detail shows moderate forward momentum. First quarter GDP growth eased to a 1.8 percent annualized pace, following a 3.1 percent boost in the fourth quarter. First quarter growth came in lower than the median projection for 2.0 percent.

The softer growth in the first quarter was largely due to a sharp upturn in imports, a deceleration in personal consumption, a larger decrease in federal government spending, and decelerations in nonresidential fixed investment and in exports that were partly offset by a sharp upturn in private inventory investment.

Nonetheless, relative strength was seen in personal spending, investment in equipment & software, and inventory investment. Exports also continued to rise although not as rapidly as earlier. PCEs rose an annualized 2.7 percent, following 4.0 percent in the fourth quarter. Equipment & software improved to 11.6 percent from 7.7 percent the prior quarter. Inventories rose a moderate but stronger $43.8 billion, compared to $16.2 billion in the fourth quarter. Exports gained 4.9 percent in the first quarter, following 8.6 percent in the previous quarter.

Final sales of domestic product posted at a sluggish 0.8 percent in the first quarter, compared to 6.7 percent the prior quarter. Final sales to domestic purchasers (takes out net exports) slowed to a 0.9 percent increase from a 3.2 percent rise in the fourth quarter. Deceleration in both was primarily due to a sharper drop in government purchases and a fall in structures investment-especially nonresidential but also residential.

Overall, the headline number was disappointing as were the final sales figures. But key components-consumer spending, equipment investment, and inventory investment-are maintaining forward momentum.

The GDP report is nothing but fluff – and is a big part of the CON. It’s so far removed from reality that I’m personally shocked that anyone takes this seriously. The big picture is that DEBT should not count as productivity, nor should any financial engineering – remove that and our true productivity would likely be half of what is reported. But let’s ignore that and play along with the central banker game…

Below is the table from the BEA’s GDP Report with the current “deflators” highlighted:

The “Deflator” is used to supposedly correct for inflation to make the GDP number “Real.” This deflator is supposed to represent annualized inflation. So, the BEA adds up all the “productivity” and then subtracts the deflator to find “real growth.” Note that last year there was a string of 2.0% deflators, then in Q4 it fell to .3%, and is now a supposed 1.9%.

Okay, but does that really represent annualized inflation? Not even close. Of course the PPI and CPI numbers are also complete fantasy, but as I look around I see a set of numbers that seems closer to the truth – namely Import and Export Prices. March is the end of Quarter one, and in the month of March Import prices were reported up by 2.7% just for that month alone! Annualize that number (without compounding) and it’s a staggering 32.4%! But if you just add up the prior year’s Import price inflation, it adds up to 9.7%!!! And just to prove that this is no fluke, export prices rose 9.5% in the past year even with our government’s own figures.

Import and export prices more accurately measure the true fall in the value of the dollar. Now, trade inside of the United States may not see all of this price inflation immediately, that takes time. Still, real inflation, in my opinion, is much greater than the deflator values suggest. In essence what I’m saying is that the supposedly positive GDP reflects money creation, not productivity as it is anything but “real.”

Remember, there are three types of “money;” Sovereign, credit, and “other” (derivatives, margin, etc.), the total of which is completely impossible to track and very much out of control.

Let’s take a quick look at a long term dollar chart that Jesse made, this will give you the long term perspective of just how far the dollar has fallen in value versus the “basket” currencies it is measured against:

The dollar is now down in the .72 region, not far above the all-time lows.

Keep in mind that the dollar index is NOT real either – all the currencies in that basket are depreciating. So, to see real, you need to compare the dollar to something outside of that basket, and that would be the real price of tangible things – just look at the price of gold or even a candy bar to get an idea of real dollar devaluing.

So, if stocks rise while the dollar is falling in value, is the rise “real.” No, because that share of stock, if sold, will actually buy you less than it used to.

And now we have an interesting development with the Russell 2000 small cap Index rising to new all-time highs yesterday:

Of course the other indices have a way to go, but the Transports are pretty close, while the NDX and XLF are very far away from their respective all-time highs. Still, should the major indices join the RUT, then the big picture wave count changes. And this is exactly why McHugh has changed his big picture outlook to a belief that the Grand Supercycle wave III did not in fact top in the year 2000 as almost everyone believed. If his read is correct, that means that the timeframe from the year 2000 until March 2009 was wave 4 within III and that we are currently in a wave 5 movement to complete Grand Supercycle III. If that read is correct, then it means that once wave 5 of III tops, that we will experience something on a larger scale than the past decade as wave IV progresses.

I personally do not know what is true in regards to the waves, but what I see fundamentally is that money printing allowed the private banks to capture the markets and to capture our political system. I think that waves will happen until complete confidence in the current money system is gone, and that confidence is eroding further every day.

Bernanke’s CON of a press CONferenence didn’t seem to promote CONfidence in the dollar. Instead the dollar tanked some more, gold, silver, oil, and even stocks rose as there is obviously no end in sight to zero percent interest rates or the artificial money printing and capture of the planet.

For confidence to flourish, people must believe that the rule of law is being upheld. I maintain that there is the natural rule of law, and then there is the man-made version which can be manipulated and changed. I maintain that the bankers have captured politics with their money printing, and that they have had the man-made laws changed to suit them. The gap between the man-made laws and what is real and natural is getting larger and larger. As that gap grows, it will reach a point at which the people will just find it unacceptable to live with the glaring gap.

The most important natural rule of law is that the agreed to money system not disadvantage the majority. This is the basis of usury and why it is so important – in this regard we are miles and miles away from the natural and proper order of things (rule of law). But a symptom of the money capture is political capture… and this is why it’s important to have leaders that we have confidence in.

And I must say that I did not have any confidence in George Bush, but I now have even less confidence in Obama. Both, of course, are obvious puppets of the central banks – as have national level politicians been since the CON of the “Federal Reserve Act.” But never in my life have I seen so many con men in so high of places.

First of all, I’ll point out that Donald Trump is nothing but a narcissistic con man – what he does he does for his own gain, not for the gain of humanity. Again, simply look at his stance on the banks and on Wall Street – he has repeatedly stated that he would leave them alone, and if anything would further deregulate them. That alone is all you need to know – he is making overtures for his own personal gain and thus what he says lacks the underlying truth.

Now, let’s address the “birther” issue… I started out skeptical. In fact, I even was guilty of ignoring this issue and falling into the media boxing it in as “nutty.” Like most people, I failed to appreciate fully the implications that it represents – so let’s take a fresh big picture look. This issue is important for several reasons, the largest of which is confidence.

A nation’s leader should have 100% of their loyalty resting in the country which they lead. If they do not, then they may fail to make decision to the benefit of those who he represents. With Obama, I think any rational, thinking, American has to wonder if that is the case. The issues are much more complex than simply being born in the United States… It is possible to be born in the U.S., but to not have 100% of your loyalties here – that is one major issue that is largely ignored. But to me, the way this whole issue has been handled destroys my personal confidence in our President.

If it were me, I would have simply provide the long form, notarized copy of my certificate that’s sitting in the drawer in my desk a long time ago. By the way, my certificate is worn, folded, and is obviously not fresh off the computer printer. Still, a fresh copy can be requested from the hospital, but if it comes from the hospital, I can guarantee you that it doesn’t come in a layered .pdf form…

Something is not kosher. For it to be in .pdf form at all, it would have had to have been scanned as a whole, not layered. And that to me casts Obama in the role of a CON MAN. And in turn that further erodes my CONFIDENCE in him and in his administration – and that is why this is such an important issue that is being made more important by the day. Obama’s “Sideshow, and Carnival Barker” comment yesterday was obviously aimed at Trump. Yet, if Obama was not himself a CON MAN, then he would not be forced to step inside of the circus tent – and that is clearly where he resides.

No, this issue is not dead, it is more important than ever as this document release, if proven to be trumped (and I think the .pdf layers do that), then it could be the downfall of a President. And I must say, that he deserves the downfall for many things, he is not an adult and has failed to reel in and contain the out of control central bankers. The results of which are a destroyed middle-class, unnecessary wars (and thousands of deaths), totally captured markets, and the loss of confidence in our monetary and political systems. Obama’s lack of honest dealing with the “birther” issue absolutely is important – it strikes at the very character of our markets, of our political system, and the way in which we represent ourselves to the rest of the world. We are being led by a CON MAN, not that changing him out will change that – we must change out WHO controls the production of money to have significance.

Meanwhile, the special interest captured government of Japan is failing to reel in TEPCO who is absolutely making the Fukushima matter worse. More radiation, and now tinkering with the reactors and fuel rod pools is getting very dangerous with the threat of further explosions possible. Particles heavier than plutonium are now being found in the United States, and the total radiation being expelled is rising to new heights. There are too many details to cover here, so please join us in the daily thread if you wish to understand the real issues involved.

Tuesday, April 26, 2011

I’ll be away this morning; this short update is written on the evening of the 26th…

The market action earlier today (26th) moved all of the major indices above their upper Bollinger Bands. The Transports and the SPX broke out to new closing highs, confirming the uptrend. The XLF, however, is still weak, and the VIX barely moved down after producing a market sell signal yesterday. Conflicting signals to me are a sign of a phony market – one driven not by fundamentals, but instead driven by money printing and manipulation (you can’t argue the manipulation as buying bonds is manipulating equities).

Durable Goods and the worthless MBA Purchase Applications report will come in the morning prior to the bell – hopefully someone will post those in the daily thread, if not I will when I return.

The FOMC announcement comes earlier than usual with the new format – 12:30 Eastern instead of 2:15. This is a SICK game that the “Fed” plays with the markets, lip service that is in fact nothing but psychological manipulation by those who stole the power to produce this nation’s money. They have created a completely impossible math situation, and nothing that Bernanke utters will change that… especially more lip service in the form of a post FOMC news conference. It’s kind of like having your torturer whisper sweet nothings in your ear right before they dunk your head under water for the hundredth time! Gee, thanks…

Raise your hand if you think Bernanke is going to say something stupid! What a ridiculous game, I feel like we should all be pounding out our flour on the nearest flat rock…

Standard & Poor’s tonight downgraded Japan from stable to watch “negative,” just like the U.S.. The truth, of course is that the impossible math of Japan is far further progressed than here and Standard & Poor’s is anything but in front of the situation. Yes, their conflicted business model is a large part of the situation in which we find ourselves (Japan Debt Outlook Cut to Negative by S&P on Reconstruction).

More and more evidence points to our own assessments about the Fukushima nuclear plants being far more accurate than the official story line. Now they are finally admitting leaks in 3 of the reactors, they are admitting that the number 4 fuel pool is leaking, and now experts are considering the possibility that the number 3 explosion wasn’t just hydrogen, but that it also had a nuclear impetus that spread the number 3 fuel pool fuel all over the planet…

Again, to me we have a deadly serious situation in which a corporate special interest has been stonewalling the public. Not only that, the captured governments of Japan and the United States have failed to act in humanity’s best interest. At least I can give the Soviet Union far superior grades from that standpoint for the way that they quickly produced an all-out effort to contain the radiation of Chernobyl. Looking at both incidents now in hindsight, it is clear to me that the Russians lacked this special interest capture and thus the government was able to act. Sure would be nice to learn this lesson, it’s the same lesson we should have learned following the BP oil spill.

Have a great morning, carry on my wayward sons, and enjoy the “Fed” lip flappin’!

Equity futures are higher, again on the back of a broken dollar which is sinking once again. Bonds are rising which does not back the rise in equities, oil is higher, and most food commodities are slightly lower. Gold is slightly lower, but regaining its footing after being much lower overnight, and silver fell sharply off new highs yesterday when margin requirements were hiked in an attempt to manipulate the price down. This did produce a top-looking candlestick, and the price is lower this morning, however I would be very suspicious of manipulated tops as my experience is that they don’t last. The $50 silver barrier was obviously too hot for the manipulators to stand, but it is they who broke the markets in the first place, once you break confidence it cannot be undone.

The FOMC meeting begins today, and we’ll see both “Consumer” Confidence and State Street Confidence numbers at 10 Eastern. This will be interesting as one confidence number has been sinking while the other has been soaring. Guess which is which? One is benefiting from money printing while the other is taking it in the shorts. Tune into the daily thread to see how this one turns out.

This morning Case-Shiller reported home Prices for February. Month to month, home prices dropped by 1.1%, this is more than January’s .9% fall which was subsequently revised to a 1.0% decline. Year over Year, prices fell 2.6%, this is an acceleration of price decline from 2.0%, and is worse than the 2.2% drop expected. Here’s Econospin blaming the weather as if bad weather never happens in February:

HighlightsS&P Case Shiller data are mixed in what is probably a good sign for home prices which have been in a long and damaging slide. Seasonally adjusted data for the composite 10 index show a 0.2 percent decline for February, less steep than the 0.3 percent and 0.4 percent declines of the two prior months. These are three-month moving averages which indicates that February showed little change. Year-on-year contraction, however, is deepening, to minus 2.6 percent vs. minus 2.2 percent in January and minus 1.4 percent in December. Unadjusted data, which is widely looked at in this report, show a 1.1 percent monthly slide that reflects weather issues.

And for those who can handle less spin, here’s the entire report including a couple of nice charts worth taking a look at – Can you say “double dip?” I thought so, let’s face it, the housing market is broken:

With earnings season in full swing, “profits” appear on the surface to be peachy. However, looking under the hood a little the falsehoods of fraud and money printing can be seen if you’re willing to look. For example, the XLF has been lagging far behind the rest of the market despite record “profits” for Wall Street banks. Here’s a chart of the XLF, why is it lagging so badly?

April 26 (Bloomberg) -- The biggest percentage drop in quarterly revenue in three years, driven by lower lending and reduced fees, is damping investor appetite for shares of the six largest U.S. banks.

Net revenue at the six lenders -- Bank of America Corp., JPMorgan Chase & Co., Citigroup Inc., Wells Fargo & Co., Goldman Sachs Group Inc. and Morgan Stanley -- fell 13.3 percent in the first quarter from a year earlier, according to data compiled by Bloomberg. Pretax pre-provision profits, which exclude taxes, loan-loss provisions and one-time items and are considered a better gauge of profitability than earnings, slid 40.2 percent.

While five of the banks beat analysts’ estimates, and JPMorgan and Wells Fargo reported record quarterly earnings, anemic revenue and a steady drop in pre-provision profits have kept investors at bay. Since JPMorgan reported earnings on April 13 with a 67 percent rise in net income to $5.6 billion, the KBW Bank Index of the 24 largest U.S. banks has fallen 3.5 percent as the Standard & Poor’s 500 Index climbed 1.6 percent.

“You’re seeing people backing off of exposure to this space because of the lack of loan growth and poor revenue growth,” said Paul Miller, a former examiner for the Federal Reserve Bank of Philadelphia and an analyst for FBR Capital Markets in Arlington, Virginia. “It’s not a sell-off -- it’s more of a slow drift down. These stocks are going to trade very weak” until their loan books and revenue start to grow.

The bottom line is that the banks are NOT making money the old fashioned way – via prudent lending. The large banks have morphed into something completely unrecognizable… they are now behemoth corporations that control the production of money, they control and manipulate all the markets, and they speculate in the same markets that they own and control. Oh, and while they are doing that, they are busy marking their debt and derivatives to a fantasy model of their own creation! Nice business model. The truth, of course, is that the large banks are insolvent, as in BROKE when their REAL assets are compared to their liabilities. These banks literally own the “FED” and they have totally captured politics and economic policy.

It’s quite the bizarre situation when you pause to really think about it.

Yesterday’s market volume was the lowest of the year. It also produced a VIX market Sell Signal which occurs when the VIX closes back above the lower Bollinger band after closing a daily candle below it:

That sell signal has been overrun recently by money printing, so I wouldn’t bet the farm on it, especially with inverted and bullish Head & Shoulder patterns in play. Still, this signal if it is prophesying a market decline, usually leads the market by a few days – so patience is required even when the market isn’t as highly manipulated as it is now.

Here's the latest update from Arnie Gunderson calling for a pause and rethinking of our nuclear power programs - he's spot on, only I think the shift needs to be even more dramatic:

From my perspective the regulators are broken, the housing market is broken, the banks are broken, the United States is broke, the rest of the developed world is broke, and what we call “markets” are completely and totally broken. Oh, and don’t forget Broke Back Bucky, he’s broken too…

Monday, April 25, 2011

Equity futures are flat to down slightly heading into the open. The dollar is lower, bonds are flat, oil is higher, gold is higher, silver gapped higher, and most food commodities are substantially higher as well.

New Home Sales are released at 10 Eastern this morning. This is a busy week for economic data, the FOMC announces on Wednesday, Q1 GDP comes on Thursday, and we’ll see both “Consumer” Confidence and Sentiment numbers this week – something that commodity prices should be affecting.

It seems like much time is wasted wondering what the Chinese will do – will they revalue the Yuan? Will they sell off their U.S. debt holdings? In the end, whatever they do is the result of the impossible math that WE’VE created. The impossible math is glaringly obvious, yet we continue to do nothing about it except to distract the masses with “investigations” into high oil prices (which never find anything or anyone to blame), or by dropping bombs on other world leader’s compounds as if assassinating whoever we want is no big deal.

I have to keep this update short as I will be out of town for the morning – will have more tomorrow.